[mike5100]

I think PCP is the next sub-prime scandal, but I can't find out why. I've been researching the concept and I can't see who loses - but someone has to - this is capitalism after all
FWIW Dibbsy I think you are morally in the right and should demand they discount the headline figure of the bike by £80 before they do the paperwork.
Mike

 

[mike5100]

the way I see this PCP thing is that in any deal we should consider two bikes because almost always someone is trading in (at the beginning or the end of a PCP deal).
So the players are 'you' the dealer, the finance company and the next owner. All of those parties have to get something out of it, and for years there was a particular ratio I guess of gains and losses. PCP can only change those ratios - it cannot make something out of nothing. So if you 'gain' from a PCP deal someone else is losing - problem is I can't work out who
Mike

 

[mike5100]

...... I guess what's bothering me is that the PCP deal COULD seemingly create something out of nothing by piling up some liabilities somewhere in the chain which may come home to roost like the sub-prime or mis-selling of financial products did.
Mike

 

[mike5100]

To hopefully answer a few points raised....
Re the sub prime comments this is surely not relevant because the final optional payment to own the bike outright is also a guaranteed minimum value, so if the market bombs out or motorcycles are banned or whatever then you are safe in the knowledge that you can just hand the bike back and the finance company will pay out the final value set at the beginning of the policy. ie you are not solely dependant on the market value of the bike. The finance company have given you a guaranteed final value. it is a safety net if you like, regardless of the market....The problem with sub prime amongst other things is a house does not have a guaranteed minimum value, it is only worth what someone is willing to pay for it.

Isn't this where the crunch will come? I hear stories now of dealers persuading PCP 'owners' to trade in early and lots of 2 year old vehicles appearing on forecourts. But if everyone is buying new on PCP who is going to buy these nearly new cars, and if that means the prices are going to fall then you can guarantee that the finance companies or the dealers will have to do something about the guaranteed prices (are there clauses in the small print?). Or look at it another way - if previously owners were the ones taking the hit on depreciation and now they are not, then someone has to and I can't see it being the finance companies.
Mike

 

[mike5100]

I will think about your points gasman, but I still say that until PCP the first buyer of a car took the hit on huge depreciation in the first couple of years and subsequent buyers got a relative bargain. If that first buyer is not taking the hit now, then who is?
Mike

 

[mike5100]

Well I'm not sure what the property market is like in the US Captain S, but in the UK it's completely different from the vehicle market. Houses are expected to appreciate whereas vehicles will always depreciate.
Mike

 

[mike5100]

I think I have found one part of the chain that loses out - HM government it loses a substantial chunk of VAT. So I can't see them being too happy about that.
This is what Wikipedia says:
"Unlike Personal Contract Hire, the leasing company can reclaim the VAT, and this means that the monthly payment would be less because:
the interest charges are applied to the net of VAT cost price i.e. a £20,000 car would be £17,021 without the VAT, giving substantial savings on interest charges
the depreciation on the car is based on the net of VAT cost price, immediately saving the customer a significant amount of depreciation.
In a personal contract hire, the lessee pays VAT on the monthly payment."

Also what sort of companies are now carrying the risk that used to be borne by the consumer (whether he bought by cash or hire purchase)?
Mike